In a research report Wednesday, Stifel Nicolaus & Co.'s Richard E. Jaffe said the proposal is valued slightly less than similar deals in the specialty apparel segment. Jaffe estimated Men's Wearhouse should be acquired for at least $52 per share.
He suggested such a price would make it more of a stretch for Jos. Bank.
Davidowitz questioned Jos. Bank's entire growth strategy. He said its troubles stem from over-aggressive promotions and selling to a squeezed middle class during a weak economic recovery. An acquisition that adds debt is not the solution, he said.
"Here is a crippled company that goes out and decides to buy its much stronger, larger competitor," he said. "Add all of this debt, and it looks kind of crazy to me. They better focus on fixing their own business."
Jos. Bank said it would fund the deal with a mix of cash on hand, debt and a new $250 million investment from Golden Gate Capital, a San Francisco private equity firm that specializes in retailers and restaurants.
Black said the two retailers, which would likely remain separate chains, would fit well together because they sell similar merchandise but cater to different types of consumers.
"Most casual observers might not think that, but that does appear to be the case," Black said. "We consider ourselves to be a classic apparel company. Our products are more traditional and more conservative, and our customer base is slightly older. Theirs is a little more contemporary, a little younger, a little less affluent and a little more forward in styling."
Jos. Bank traces its roots to a Baltimore tailor who established a clothing manufacturing business in 1905. His grandson Joseph A. Bank started as a cloth cutter and later took over the business, renaming it after himself in 1945. The suitmaker mostly sold to other retailers, but started selling out of its factory and began opening other outlets in the 1960s.
Men's Wearhouse is a much younger company, founded in 1973 by George Zimmer, who is known to TV audiences for his advertising catchphrase: "you're gonna like the way you look — I guarantee it." The company fired Zimmer, then its chairman, in June, saying he had pushed to take the company private and demanded to be reinstated as the company's sole decision-maker.
June was a rough period for both retailers. Jos. Bank acknowledged in June that its heavy promotions were no longer as effective as they were in the recession. To jumpstart growth, it said it would boost online sales, market to big and tall-sized customers and open new stores. Its also recently come under pressure from shareholders to boost the stock value.
But the moves came too late for a quick sales turnaround. In its quarter ended Aug. 3, Jos. Bank reported sales fell 11 percent overall and 16 percent in stores open at least one year.
The decline came amid a rebound for men's tailored apparel, with sales for the year that ended in August up nearly 11 percent, according to the NPD Group.
Despite Jos. Bank's troubles, it attracted the support of Golden Gate, which manages more than $12 billion and is invested in such firms as Payless ShoeSource, Eddie Bauer, J. Jill, Pacific Sunwear and California Pizza Kitchen.
The investment firm saw the potential combination of two top men's apparel retailers as "a natural and highly complementary fit that creates a great opportunity for these companies to deliver impressive growth as a result of the transaction," said Josh Olshansky, a managing director at Golden Gate, in a statement released by Jos. Bank.
Two suit sellers by the numbers
Jos. A. Bank Clothiers Inc.
Headquarters: Hampstead, Md.
Sales: $1.05 billion
Stores: 623 stores in 44 states
Headquarters: Houston, Texas
Sales: $2.49 billion
Stores: 1,147 stores including K&G and Moores